ECO 204                            HOMEWORK 8

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l.      A monopolist's marginal revenue curve slopes down faster than its 
        demand curve because:

        a.      economies of scale are significant
        b.      selling more requires lowering the price of all units sold
        c.      hiring more resources entails higher costs as output expands
        d.      marginal revenue minus demand is greater than zero

2.      Compared to a competitive firm with identical cost structures, a firm with monopoly 
        power would usually:

        a.      be less efficient
        b.      produce more and make less profits
        c.      produce more, make higher profits, and charge a higher price
        d.      have a flatter marginal revenue curve

3.      If cost conditions are otherwise identical, then, compared to the outcome of a purely 
        competitive market, a monopolist:

        a.      produces less and charges more
        b.      maximizes total profits whenever possible
        c.      confronts a demand curve where P = MR
        d.      produces more and charges more

4.      Restricting output below the competitive equilibrium output will:

        a.      raise price above the competitive equilibrium price
        b.      raise price above the marginal cost of the last unit produced
        c.      generate a deadweight efficiency loss from underproduction
        d.      all of the above

5.      A firm can practice price discrimination if it:

        a.      confronts a perfectly elastic demand curve
        b.      is a pure quantity adjuster
        c.      has some monopoly power and is able to separate its customers into different 
                groups with different elasticities of demand
        d.      confronts a downward-sloping demand curve in a purely competitive industry

6.      Monopolists are more likely to earn economic profits in the long run than are pure 
        competitors because:

        a.      monopolists are crooks
        b.      monopolists are more interested in profits
        c.      there are barriers against entry of new firms in a monopoly market
        d.      pure competitors are more interested in social welfare

7.      If a monopolist were selling a quantity such that MR > MC, then it could increase 
        profits by:

        a.      raising price
        b.      increasing output
        c.      raising its advertising budget
        d.      decreasing output

8.      For a nondiscriminating monopolist, marginal revenue is:

        a.      profit per unit minus cost per unit
        b.      total revenue per unit minus total cost per unit
        c.      the change in total revenue divided by the change in total cost
        d.      consistently less than the price charged

9.     Natural monopoly refers to a situation in which:

        a.      monopoly is the result of unlimited economies of scale
        b.      a firm becomes a monopolist because of its superior management
        
10.     A monopolist maximizes its total revenue where marginal revenue:

        a.      equals marginal cost
        b.      is rising
        c.      is zero
        d.      is negative

11.     Price discrimination is impossible if:

        a.      arbitrage is impossible
        b.      all consumers have identical demand curves for the good
        c.      firms are not price takers
        d.      products are differentiated

12.     If a monopolist's demand is price elastic, marginal revenue is:

        a.      positive
        b.      negative
        c.      zero
        d.      independent of price elasticity